Shrinking working-age population hurting Chinese economy

China’s economic slowdown has been well-documented, as have the reasons for it. One of the driving forces behind China’s explosive growth over the past couple of decades has been its gigantic workforce. But those golden days appear to be over as our Park Jong-hong reports.

For the first time in a quarter-of-a-century, China’s economy failed to grow more than seven percent last year. For years, China has been propelled by a vast source of cheap workers unmatched anywhere in the world.

But times are changing. In fact, the Chinese Academy of Social Sciences says China’s so-called “demographic bonus” is over. Demographic bonus refers to a country’s economic growth potential when the working-age population is larger than the non-working-age of 14 and younger, and 65 and older.

In 2013, China’s working-age group peaked at more than one billion, but since then, the figure has been heading south. By contrast, the number of elderly Chinese is rising fast. Their number surged by more than 12 million over the course of two years to nearly 144 million in 2015.

The trend is adding to concerns about the slowdown in China. Some global investment banks forecast China’s growth will slip below six percent this year. The slowdown is already impacting the Korean economy, which is heavily dependent on exports to China. Korea’s working-age population is also projected to contract due to the nation’s chronically low birthrate. Based on figures from Statistics Korea, the number will peak at 37 million this year.

But it’ll start to sharply decrease from 2020 when the baby-boomer generation enters post-retirement. Some experts say the aging trend combined with slowing domestic consumption and uncertainties overseas means Korea’s future growth potential looks dim. Moody’s forecasts Korea’s growth rate next year will be around two-and-a-half percent, on par with that of the United States and Britain.